Stock Market CRASH: Yields Jump & Rattle the Stock Market After PCE Inflation & Powell's Remarks
TLDRThe transcript discusses the financial market's reaction to the PCE inflation data and Federal Reserve Chairman Powell's remarks on interest rates. It highlights the market's sell-off, the rise in treasury yields and the dollar, and the impact on various market indices like the Dow, S&P, and NASDAQ. The speaker also analyzes technical indicators like the 10-year treasury note yield, the VIX, and trend lines, warning of potential market reversals and emphasizing the importance of the upcoming jobs report and CPI data.
Takeaways
- 📈 The market experienced a sell-off following the release of the PCE inflation data, despite initially positive futures reaction.
- 📊 The PCE inflation data for February showed mixed results with the headline number coming in at 2.5%, slightly higher than the 2.4% expected.
- 💹 Powell's remarks on not rushing to cut interest rates influenced the market, leading to a jump in treasury yields and a surge in the dollar.
- 📉 The Dow Jones Industrial Average saw a significant drop, while the S&P 500 and NASDAQ had varied performances.
- 🔄 The 10-year treasury note yield and the dollar showed a negative correlation with the market, with both seeing upward movement.
- 📆 Upcoming economic events, including speeches by Fed officials and the jobs report, could further impact market trends.
- 📈 The dollar has broken a downtrend and is attempting to clear overhead resistance, which may influence market direction.
- 🔄 The VIX experienced an increase, indicating higher market volatility and potential uncertainty among investors.
- 📊 Technical indicators like the MACD and RSI are showing multiple point negative divergences, which could signal a market reversal.
- 🚀 The NASDAQ has been moving sideways for the last 5 weeks, potentially indicating distribution with overvalued tech stocks.
- 🔄 Market trends are being closely watched, with focus on whether the S&P and NASDAQ will break trend lines or attempt to reach new highs.
Q & A
What was the market's reaction to the PCE inflation data released in February?
-The market was closed for Good Friday when the PCE inflation data was released. However, the reaction upon reopening showed mixed results. The headline PCE inflation number came in at 2.5%, which was in line with expectations but still higher than the previous 2.4%. The core PCE, which excludes food and energy prices, also came in at 2.8%, slightly lower than the previous 2.9%. This led to a sharp sell-off in the market, with the Dow Jones Industrial Average falling over 300 points and the S&P 500 and NASDAQ also experiencing declines.
What did Powell say that affected the market's reaction?
-Federal Reserve Chairman Jerome Powell stated that policymakers do not need to be in a rush to cut interest rates. This was because economic growth remains strong and inflation is above its target. His comments led to a jump in treasury yields by 3% and a surge in the dollar, which negatively impacted the stock market.
How did the 10-year treasury note yield and the dollar perform after Powell's speech?
-Following Powell's speech, the 10-year treasury note yield jumped by 3% and the dollar surged. These movements are significant as they have a negative correlation with the market, meaning when yields and the dollar rise, the market typically falls, and vice versa.
What is the significance of the 50 and 200 period moving averages on the 10-year treasury note yield chart?
-The 50 and 200 period moving averages on the 10-year treasury note yield chart are important technical indicators. The fact that the 50 period moving average is above the 200 period indicates a potential upward momentum. The script mentions that the 10-year yield is attempting to break above the 200 period moving average, which could be a significant breakout if successful.
What economic reports are expected to influence the market in the coming weeks?
-In the coming weeks, the market will be influenced by several economic reports. The jobs report is expected on a Friday before the market opens, with employment rates anticipated to be at 200,000 and the unemployment rate expected to decrease to 3.8%. Additionally, the CPI (Consumer Price Index) report is due on April 10th, which is crucial as it can significantly impact market sentiment if it misses expectations.
What is the significance of the VIX index in the context of the script?
-The VIX index, also known as the fear index, measures the market's expectation of volatility over the next 30 days. In the script, it is mentioned that the VIX initially showed strength, jumping above the 50 and 20 period moving averages. However, it closed back below these levels, indicating a potential topping pattern. This suggests that although there was an initial increase in expected volatility, it may be subsiding.
What does the term 'bull flag' refer to in the context of the script?
-In technical analysis, a 'bull flag' is a continuation pattern that indicates a pause in an upward trend before the continuation of the rally. In the script, it is mentioned that the market broke out of a bull flag, suggesting a strong upward momentum following a period of consolidation.
What is the significance of the 'golden cross' mentioned in the script?
-A 'golden cross' is a technical indicator that occurs when a short-term moving average, such as the 50-day moving average, crosses above a long-term moving average, like the 200-day moving average. This is generally seen as a bullish signal, indicating that a new upward trend may be beginning. In the script, it is mentioned that the dollar has already crossed above the 200-day moving average, forming a 'golden cross'.
What is the potential impact of the FOMC minutes on the market?
-The Federal Open Market Committee (FOMC) minutes provide insights into the discussions and decisions made during the committee's monetary policy meetings. The release of these minutes can have a significant impact on the market as they offer clues about future monetary policy decisions, including potential interest rate changes. The script mentions that the FOMC minutes will be released on the same day as the CPI report, which could lead to increased market volatility.
What does the script suggest about the potential future direction of the NASDAQ?
-The script suggests that the NASDAQ has been moving sideways for the last five weeks, indicating a potential period of distribution for overvalued tech stocks. It also mentions multiple negative divergences on the NASDAQ, which could signal a potential reversal of the upward trend. The script highlights the importance of watching whether the NASDAQ can make a new high or if it will start breaking down.
What is the significance of the 'rising wedge pattern' on the S&P 500?
-A 'rising wedge pattern' is a technical chart pattern that is typically considered a bearish signal, indicating a potential reversal of an upward trend. In the script, it is mentioned that the S&P 500 is within a rising wedge pattern, and the speaker will be watching for a breakout or breakdown from this pattern, which could signal the next market move.
Outlines
📉 Market Reaction to Inflation Data and Powell's Speech
The paragraph discusses the market's reaction to the PCE inflation data and Powell's speech. The market was closed for Good Friday, but the PCE data showed a 3/10 of a percent decrease month-over-month, with the core number aligning at 3/10. The year-over-year headline number was in line at 2.5, slightly higher than the previous 2.4. Powell's speech indicated that policymakers are not in a rush to cut interest rates, as economic growth remains strong and inflation is above target. This led to a jump in treasury yields by 3% and a surge in the dollar, causing the Dow to drop over 300 points and the S&P to decrease by 2/10 of a percent. The NASDAQ, however, ended with a positive close, up by 38 points, while the Russell 2000 was the worst performer of the day, down by 1%. The VIX rose by 4.92%, indicating increased market volatility.
📈 Economic Outlook and Fed Speakers' Influence on the Market
This paragraph focuses on the economic outlook and the impact of various Federal Reserve speakers on the market. It highlights the lack of urgency to cut interest rates as expressed by Fed Governor Waller and Fed Chair Powell, due to the current state of economic growth and inflation. The week is filled with numerous Fed speakers, potentially leading to market volatility. The paragraph also discusses the market's reaction to Powell's previous remarks and anticipates further reactions to his upcoming speeches. Additionally, it mentions the importance of the jobs report and the CPI data release on April 10th, which could significantly affect the market if they miss expectations.
🔄 Market Trend Analysis and Potential Reversal Signs
The paragraph delves into a technical analysis of the market trends, focusing on the S&P 500, the dollar, and the VIX. It discusses the dollar's upward trend, breaking above the 50 and 200-period moving averages, and the potential for the S&P to break down from its rising trend line. The paragraph also mentions the 10-year yield's attempt to clear overhead resistance and the dollar's struggle to clear the 20-month moving average. The VIX's behavior, including its initial strength and subsequent topping tail, is analyzed to predict potential market reversals. The paragraph concludes by highlighting the importance of watching trend lines and indicators for signs of a market reversal or continuation of the current trends.
📊 Analyzing Divergences and Market Indicators for Potential Shifts
The paragraph discusses the presence of multiple divergences in market indicators, such as the RSI and MACD, for both the S&P 500 and NASDAQ. It notes that while the S&P has shown resilience by making a higher high, the NASDAQ has been moving sideways for five weeks, indicating distribution of overvalued tech stocks. The paragraph emphasizes the importance of monitoring these divergences and indicators, as they could signal a potential market reversal or continued bullish trend. It also mentions the potential for the S&P to reach its upper boundary again and the need to watch for a rollover in the stochastic and MACD indicators, which could indicate a trend change.
🔄 Continuation of Market Trend Analysis and Channel Breakouts
The paragraph continues the analysis of market trends and channels, focusing on the Dow and NASDAQ. It discusses the Dow's potential to reach 40,000 and the S&P's struggle with trend lines and moving averages. The paragraph also highlights the presence of negative divergences on the NASDAQ and S&P in the weekly time frame, which could indicate a potential trend reversal. The behavior of the stochastic indicator and the potential for a rollover are also analyzed. The paragraph concludes by emphasizing the importance of watching for trend line breaks and the potential for the market to either rebound or continue selling off.
📉 Indecision and Divergence in the NASDAQ and S&P 500
The paragraph examines the indecision and divergence present in the NASDAQ and S&P 500. It notes the NASDAQ's struggle to make a new high and the S&P's higher high, which could indicate a turning point. The paragraph also discusses the presence of negative divergences on the NASDAQ and the potential for a trend continuation or reversal. The importance of monitoring trend lines and channel boundaries is highlighted, as well as the potential for the NASDAQ to reach its upper channel line or break down further. The paragraph concludes by emphasizing the need to watch for signs of a market reversal or continued bullish trend in the face of multiple divergences.
Mindmap
Keywords
💡Easter
💡PCE inflation data
💡Jerome Powell
💡Treasury yields
💡Dow Jones Industrial Average (DJIA)
💡S&P 500
💡NASDAQ Composite
💡VIX
💡Federal Reserve speakers
💡Economic Outlook
💡Breakout
Highlights
The market was closed for Good Friday, and the PCE inflation data was released.
The PCE inflation data, a preferred gauge of inflation, showed a 3/10 of a percent decrease month-over-month, with the core number in line at 3/10.
The year-over-year headline number for inflation came in at 2.5, slightly higher than the previous 2.4.
The core year-over-year number came in at 2.8, which was lower than the previous reading of 2.9.
Federal Reserve Chairman Powell spoke about not rushing to cut interest rates, as economic growth remains strong and inflation is above target.
Treasury yields jumped by 3% and the dollar surged in response to Powell's remarks.
The Dow Jones Industrial Average was down over 300 points, while the S&P 500 and NASDAQ saw mixed results.
The VIX, a measure of market volatility, rose by nearly 5%.
The 10-year Treasury note yield and the dollar have a negative correlation with the market currently.
The S&P 500 may attempt to break out of a rising wedge pattern, with Powell's remarks potentially influencing the direction.
Multiple Federal Reserve speakers are expected to echo the sentiment of not rushing to cut rates, which could impact market trends.
The dollar has broken a downtrend and is attempting to clear overhead resistance.
The upcoming jobs report and CPI data release could be pivotal for market direction, as they may confirm or challenge current trends.
Technical indicators like the MACD and RSI show potential divergences that could signal a market reversal.
NASDAQ has been moving sideways for the last 5 weeks, indicating a potential distribution of overvalued tech stocks.
The S&P 500 and Dow Jones Industrial Average are showing signs of potential bearish patterns like the evening star.
Investors should watch for potential breakdowns in trend lines and moving averages, which could indicate a change in market conditions.
The market is currently in a period of consolidation, with investors potentially waiting for more clarity from economic indicators and central bank communications.